What Sets Co-ops Apart?

The number of residential customers co-ops serve is just one of the things that set them apart from investor-owned and municipal utilities. The cooperative principles by which they operate, the diversity of their customer base, and their history of consumer advocacy and conservation also make co-ops different.

Cooperatives are member-driven, not profit-driven. Operating much like a grocery cooperative or a credit union, each electric cooperative is an independent utility owned by its customers. Unlike investor-owned utilities, cooperatives set their rates strictly to cover the cost of doing business. If annual revenues exceed costs, co-op members get a credit.

This willingness to forego profits helped electric co-ops take root in sparsely populated areas across the United States in the 1930s and 1940s. All of the 22 electric co-ops now operating in Colorado were created between 1936 and 1946. At the time, nine out of 10 rural homes had no electricity, and it was not profitable for investor-owned utilities to expand beyond the densely populated areas they served. Remote areas had too few customers to provide a return on the significant investment in infrastructure that was needed.

The Rural Electrification Act of 1936 created a program to support the expansion of electric service to small communities, which included loans for electric cooperatives. As a result, the number of rural homes with electricity more than tripled in five years’ time.

Today, electric cooperatives are the only U.S. utilities that rely on government and other loans to finance capital construction. Unlike municipal or investor-owned utilities, they do not receive tax-exempt financing or revenue bonds. Instead they repay loans monthly with interest.